Benefits are not just “icing on the cake” acting as an extra enhancement to your employment brand. They need to be strategically aligned with your overall business goals – because, let’s face it, they cost a lot of money and those costs are only expected to increase steadily over time.

US Spends $2.9 trillion on health care per year

The US is projected to spend $2.9 trillion on health care in 2012 – almost as much as food, clothing, and national defense combined – and is expected to reach $4.6 trillion in 2020. In fact, if our current health care system were its on country, it would be the 7th largest economy in the world according to Business Roundtable.

Employers Spend $1.4 trillion on health care per year

This spending is split up between a mixture of government, non-profit, and private expenditures. Employer-based benefit programs fall into the private health care expenditure bucket. Currently, employer-based benefit programs account for roughly half (54% in 2009) of all US health care expenditures. This means that collectively, as employers, we are spending approximately $1.4 trillion on health care benefits. Cha-ching!

Benefits are more than decoration

Benefits shouldn’t be looked at as simply a recruiting and retention tool – they are more than just the pretty icing on top of the cake of your employment brand. They cost a whole heck of a lot of money. In fact, according to the US Bureau of Labor Statistics, employers spend an average of 29.5% of salary costs on benefits.

$0.29 of every $1 of wages goes toward benefit cost

Currently, employers spend over $10,000 per year per employee on benefits. This is projected to reach $28,000 per employee per year by 2019 according to Business Roundtable. Between 1999 and 2009, health care insurance premiums increased 180% – while this trend is expected to slow, early projections are estimating an increase of 160% over the next decade.

What’s your strategy?

Ignore the increasing cost at your own peril. If trends continue, in 10 years, close to $.46 of every $1 of wages will be spent on health care. There’s a reason everyone is talking about “bending the healthcare cost curve”. Have you thought about why your organization offers benefits? Does it provide a strategic advantage? What will you do as a corporation if the health care reform legislation gets overturned or remains intact? Have you had key conversations about the possibilities with your executive team or done any modeling on cost variations? If not, you might want to think about your options before the June Supreme Court decision is rendered.

What are your plans for dealing with rising health care costs? Leave me a comment with your thoughts…